Defence City Officially Launched: What Changes for the Defence Market

On 15 January, the Ukrainian Council of Defence Industry (UCDI) hosted a closed offline meeting "Among Defence Manufacturers: Defence City is Operational, How to Become a Resident?", dedicated to the launch of the special legal regime "Defence City" and its practical application for Ukrainian defence companies.

One of the key features of the Defence City regime is the ability to export without obtaining special authority from the Cabinet of Ministers (which typically takes 6–12 months). The relevant procedure is set out in a separate regulation approved by the Government at the beginning of the year.

The Head of the State Service of Export Control of Ukraine, Oleh Tsilvik, emphasised that Defence City residency does not mean the abolition or simplification of export control procedures. Registration with the State Service of Export Control of Ukraine and obtaining a permit remain mandatory.

It is crucial for companies to prepare for the export track now. To date, about 30%* of the surveyed weapon-producing companies have registered with the State Service of Export Control of Ukraine, which is the first step toward entering the international market. These are the findings of an express survey conducted by the Ukrainian Council of Defence Industry among its members.

To help manufacturers navigate export procedures, the Ukrainian Council of Defence Industry has established the Export Support Office. During its first month of operation, the Office provided over 20 individual consultations for companies in the defence-industrial complex on entering international markets. Consultations can be requested via the Export Map page.

The Director of the Department for the Defence-Industrial Complex, Military-Technical Cooperation, and Export Control of the NSDC Staff, Andrii Tyvonchuk, outlined the role and functions of the Interagency Commission on Military-Technical Cooperation and Export Control. He announced that the commission's meeting will be held immediately after its updated composition is finalised.

Residency, Registers, and Legal Nuances of Defence City

The Deputy Director of the Department of Strategic Development of the Defence-Industrial Complex of the Ministry of Defence, Viktoriia Komisarenko, provided detailed clarifications on acquiring Defence City residency:

— Residency provides companies with significant tax incentives (exemption from corporate income tax upon reinvestment), simplified customs and currency procedures, and support for relocation to safer areas of Ukraine;

— To start, enterprises must conduct an internal audit for compliance with residency requirements;

— At the next stage, the company submits an application to the Ministry of Defence for residency status. The key document is the Compliance Report, which includes annual financial statements. At least 75% of qualified income (50% for aviation construction) must derive from defence activities.

Legal partners from Juscutum—Dmytro Paliushchenko, Head of Business Support Practice, and Petro Bilyk, Partner of Technology and Investment Practice—emphasised the critical role of well-drafted defence contracts. They stressed the importance of proper intellectual property protection, clearly defined delivery terms, and correct arbitration clauses. They specifically drew attention to clear mechanisms for working with export-import licences and the vetting of counterparties and end-users.

Register of Defence Manufacturers and the Defence City Register

The Director of the Directorate for Digital Transformation in Defence of the Ministry of Defence of Ukraine, Artem Romaniukov, presented the vision for the Register of Defence Manufacturers, which the Ministry of Defence plans to launch in February-March. The Register is designed to be a secure electronic platform for interaction between manufacturers and state buyers, simplifying some bureaucratic procedures. Currently, it is not synchronised with the Defence City register; however, such integration is considered a logical next step and will require changes to the regulatory framework.

The speakers of the event emphasised that Defence City is a new tool that has just begun operating, meaning that questions and challenges will inevitably arise during implementation. The Ukrainian Council of Defence Industry systematically collects inquiries from manufacturers, records problematic issues, and works in cooperation with government bodies to develop regulatory improvements.

• Methodology: the express survey was conducted in real-time in two waves during two profile events (Defence City / export). In total, more than 100 company representatives voted.

For Reference

The Ukrainian Council of Defence Industry (UCDI) is an independent association of private manufacturers of weapons and military equipment, which consolidates the industry, strengthens interaction with the state and international partners, and shapes Ukraine's modern security architecture. The UCDI helps manufacturers in the defence-industrial complex find partners, scale production, and secure access to financing and technology, thereby strengthening the country's defence capability.

Amongst Defence Manufacturers is a series of closed professional meetings organised by the Ukrainian Council of Defence Industry to establish cooperation between weapon manufacturers, government structures, and financial institutions. The goal is to create an effective platform for interaction among manufacturers, GR specialists, lawyers, and experts in order to drive systemic changes and increase the transparency, efficiency, and competitiveness of Ukraine's defence industry.